‘So serious and so reprehensible’ Court slams conduct of former city CAO, dismisses appeal in bribery case By: Kevin Rollason Posted: 1:40 PM CDT Friday, Jul. 7, 2023 Last Modified: 6:32 PM CDT Friday, Jul. 7, 2023 Updates

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The province’s highest court has not only agreed the City of Winnipeg’s former chief administrative officer took a bribe during the construction of the Winnipeg Police Service headquarters, it says he has to be further punished financially for his conduct.

In the unanimous decision released Friday, the Manitoba Court of Appeal also made reference to what the justices called the conduct of “the proverbial elephant in the courtroom” — former mayor Sam Katz.

In the 39-page written decision, which struck down ex-chief administrative officer Phil Sheegl’s appeal of a lower court’s decision, Justice Chris Mainella noted neither the city’s or Sheegl’s lawyers brought Katz into the lawsuit.

“This means that, currently, nobody in this civil litigation has made a formal legal accusation against Katz of wrongful conduct and, accordingly, he is entitled in law to be presumed to have done nothing wrong, regardless of what occurred during his tenure as mayor (2004-14),” Mainella wrote.

Mainella noted while Court of Queen’s Bench Chief Justice Glenn Joyal had ruled Sheegl had accepted a $327,000 bribe from Caspian Construction owner Armik Babakhanians, no evidence was ever taken from Katz, even though Sheegl later gave Katz half of the money in question.

“While it may clear the air for Katz to formally tell under oath what he knows about the two payments, he is under no legal obligation to do so unless he becomes a witness,” Mainella wrote.

“Moreover, this litigation is not a chance for Katz to speak formally on his own motion. He has no legal status. Each of the parties made the tactical choice to not adduce evidence from Katz either voluntarily or by compulsion. It would be speculative and entirely inappropriate for this court to question the decisions of counsel,” the judge wrote.

“This case is also not a public inquiry into the project; this is an appeal on the record that was before the motion judge.”

Sheegl’s lawyer, Robert Tapper, said his client will not be commenting on the decision. The lawyer said he also has advised Katz to make no comment.

Winnipeg Mayor Scott Gillingham issued a statement Friday, saying: “I’m very pleased the court has dismissed the appeal and upheld the original judgment in favour of the City of Winnipeg. I’ve consistently said we need to pursue all options to resolve this matter. Between this judgment and the settlement agreement with other parties, the city is poised to recover a significant sum of money, and that’s a victory for the people of Winnipeg.”

“Nobody in this civil litigation has made a formal legal accusation against Katz of wrongful conduct and, accordingly, he is entitled in law to be presumed to have done nothing wrong, regardless of what occurred during his tenure as mayor”–Manitoba Court of Appeal Justice Chris Mainella

Coun. Brian Mayes said he believes the appeal court’s decision is the final chapter of the WPS headquarters scandal.

“This was a pretty harsh judgment,” said Mayes, who wasn’t a city councillor when Sheegl was hired but was on the executive policy committee when the CAO resigned in 2013. “I can’t foresee any successful appeal to the Supreme Court. I think this has been litigated now. Hopefully, we’re at the finish line for this.”

The unanimous high court decision may have indeed brought an end to the long, scandal-filled story of the downtown WPS headquarters.

The saga began when the decision was made not to renovate the since-demolished Public Safety Building, but instead buy a former Canada Post building (245 Smith St.) and convert it for police to use.

The purchase and renovations were supposed to cost $135 million, but costs ballooned to $214 million. Police moved in in late 2015, but as of last year, WPS officers were still reporting problems with parts of the building’s construction.

The city launched lawsuits, seeking damages for both the deficiencies and an alleged fraudulent scheme that had inflated the cost of the project.

Earlier this year, council approved an at least $21.5-million settlement of fraud and construction deficiency lawsuits. The settlement ended all civil court actions against the defendants — except for the case against Sheegl.

Over the years, the RCMP investigated and decided not to issue criminal charges and the city asked the provincial government to call a public inquiry (the province refused).

Mainella said not only was Joyal right in ordering Sheegl to repay the bribe money (plus interest) to the city and $250,000 in severance (plus interest) he received from the city when he resigned, the lower-court judge was also correct to order the former civil servant to pay $100,000 in punitive damages and court costs.

It all added up to about $1.1 million.

Mainella said even higher punitive damages would have been justified — he even issued the rare decision of making Sheegl pay court costs for the appeal itself.

“The award for punitive damages was significant in this case to send the correct message to other ethically bankrupt officials or business people and the public generally that the civil law will administer punishment fairly and firmly when necessary,” the judge wrote.

“The conduct of Sheegl was so serious and so reprehensible that the bounds of rationality could have justified a much higher award of punitive damages than $100,000 to satisfy the need for retribution, deterrence and denunciation in light of the total award and conduct in issue… The integrity of public finances must be protected by the courts from large-scale bribery and the systemic ignorance of fiduciary duties, particularly those involving the most senior public officials.”

Court costs for the appeal also had to be ordered in this case, because if they weren’t, the city would be punished by having to pay for lawyers to fight the appeal, he wrote.

Justices Freda Steel and Janice leMaistre agreed in the 3-0 decision.

kevin.rollason@freepress.mb.ca

Kevin Rollason
Reporter

Kevin Rollason is a general assignment reporter at the Free Press. He graduated from Western University with a Masters of Journalism in 1985 and worked at the Winnipeg Sun until 1988, when he joined the Free Press. He has served as the Free Press’s city hall and law courts reporter and has won several awards, including a National Newspaper Award. Read more about Kevin.

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